Yum! Brands, Inc. (NYSE: YUM) today reported results for the
second quarter ended June 13, 2015, including EPS of $0.69,
excluding Special Items. Reported EPS was $0.53.
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SECOND-QUARTER
HIGHLIGHTS
- Worldwide system sales grew 3%.
Worldwide restaurant margin was even at 15.5%, and worldwide
operating profit decreased 1%.
- Total international development was 291
new restaurants; 75% of this development occurred in emerging
markets.
- China Division system sales declined
4%, as 7% unit growth was offset by a 10% same-store sales decline.
Restaurant margin decreased 2.2 percentage points to 14.6%.
Operating profit decreased 25%.
- KFC Division system sales increased 6%,
driven by 2% unit growth and 3% same-store sales growth. Operating
margin increased 1.3 percentage points to 21.9%. Operating profit
increased 10%.
- Pizza Hut Division system sales
increased 1%, driven by 2% unit growth. Same-store sales were even.
Operating margin decreased 0.9 percentage points to 22.6%.
Operating profit decreased 1%.
- Taco Bell Division system sales
increased 9%, driven by 3% unit growth and 6% same-store sales
growth. Operating margin increased 4.7 percentage points to 29.5%.
Operating profit increased 29%.
- India Division system sales were even,
as 16% unit growth was offset by an 11% same-store sales
decline.
- Worldwide effective tax rate increased
to 25.6% from 24.9%.
- Foreign currency translation negatively
impacted operating profit by $22 million.
Second
Quarter
Year-to-Date
2015
2014
%
Change
2015
2014
%
Change
EPS Excluding Special Items $0.69 $0.73 (5)% $1.50 $1.60 (7)%
Special Items Gain/(Loss)1 $(0.16) $0.00 NM $(0.16) $0.01 NM EPS
$0.53 $0.73 (28)% $1.34
$1.61 (17)%
1 See Reconciliation of Non-GAAP
Measurements to GAAP Results for further detail of Special Items.
Special Items in 2015 are primarily related to a non-cash charge
associated with refranchising our Mexico business.
Note: All comparisons are versus the same
period a year ago and exclude Special Items unless noted. System
sales and operating profit figures on this page exclude foreign
currency translation; restaurant margin and operating margin
figures are as reported.
GREG CREED COMMENTS
Greg Creed, CEO, said “EPS exceeded our original expectations in
the second quarter and I'm pleased with the continued progress we
are making in China, as well as the performance from our Taco Bell
and KFC Divisions. I’m confident we will deliver full-year EPS
growth of at least 10%, driven by a strong second half in China and
solid brand-building initiatives underway at each of our
divisions.
China Division restaurant margin in the second quarter was an
encouraging 14.6%, even though same-store sales declined 10%,
reinforcing our belief in significant profit leverage as sales
recover. We expect substantial same-store sales and profit growth
in the second half given overall trends in sales and brand
perceptions. Furthermore, the China Division remains on track to
open at least 700 new restaurants this year, laying the groundwork
for future growth.
Outside of China, Taco Bell is firing on all cylinders driven by
industry-leading innovation and a solid breakfast platform. KFC
continues to produce consistently positive results in both emerging
and developed markets, including our U.S. business. At Pizza Hut,
results continue to be soft, but we are taking clear steps to get
the business back on track.
Internationally, we’re on pace to set a new record this year by
opening 2,100 new restaurants, extending our lead in emerging
markets. All of this should help us to achieve double-digit
earnings growth this year, despite ongoing headwinds from foreign
currency translation.
Our goal remains building three iconic, global brands people
trust and champion, while delivering shareholder value through our
three key drivers: same-store sales growth, new-unit development
and high returns on invested capital. As we continue to strengthen
our business around the world, I'm confident that this formula will
produce consistent double-digit EPS growth over the long term.”
CHINA DIVISION
Second
Quarter
Year-to-Date
% Change % Change
2015
2014
Reported
Ex
F/X
2015
2014
Reported
Ex
F/X
System Sales Growth (4) (4) (6) (5) Same-Store Sales Growth (%)
(10) +15 NM NM (11) +12 NM NM Franchise & License Fees ($MM) 28
26 +2 +2 49 49 (1) Even Restaurant Margin (%) 14.6 16.8 (2.2) (2.2)
16.4 19.8 (3.4) (3.3) Operating Profit ($MM) 144
194 (26) (25) 334 479
(30) (29)
- China Division system sales
decreased 4%, prior to foreign currency translation.
- Same-store sales declined 10%,
including declines of 12% at KFC and 4% at Pizza Hut Casual Dining,
reflecting continued recovery from adverse supplier publicity in
July 2014.
- China Division opened 80 new units
during the quarter.
China Units Q2
2015 % Change2 Restaurants1 6,853
+7 KFC 4,889 +5 Pizza Hut Casual Dining 1,388 +22 Home Service
276 +28
1 Total includes East Dawning and Little
Sheep units.
2 Represents year-over-year change.
- Restaurant margin was 14.6% in a
seasonally low period, a decrease of 2.2 percentage points, driven
by sales deleverage.
- Foreign currency translation negatively
impacted operating profit by $1 million.
KFC DIVISION
Second
Quarter
Year-to-Date
% Change % Change
2015
2014
Reported
Ex
F/X
2015
2014
Reported
Ex
F/X
Restaurants 14,234 13,906 +2 NA 14,234 13,906 +2 NA System Sales
Growth (4) +6 (2) +7 Same-Store Sales Growth (%) +3 +2 NM NM +4 +2
NM NM Franchise & License Fees ($MM) 189 196 (3) +7 386 391 (1)
+7 Restaurant Margin (%) 15.3 12.9 2.4 2.2 15.3 12.9 2.4 2.2
Operating Profit ($MM) 152 155 (2) +10 321 318 +1 +11 Operating
Margin (%) 21.9 20.6 1.3 0.8
24.0 22.4 1.6 1.0
- KFC Division system sales
increased 6%, excluding foreign currency translation.
Second Quarter (% Change)
Int'l Emerging Markets Int'l Developed
Markets U.S. System Sales Growth (Ex F/X) +12%
+5% +1% Same-Store Sales Growth +3% +2%
+3%
- KFC Division opened 122 new
international restaurants in 39 countries, including 89 units in
emerging markets. 85% of these new units were opened by
franchisees.
- Operating margin increased 1.3
percentage points, driven by same-store sales growth and new-unit
development.
- Foreign currency translation negatively
impacted operating profit by $19 million, as approximately 90% of
division profits are generated outside the U.S.
KFC MARKETS1
Percent of KFC System Sales
2
SYSTEM Sales Growth Ex F/X Second Quarter (%)
Year-to-Date (%) Emerging Markets Asia (e.g.
Malaysia, Indonesia, Philippines) 8% +6 +5 Africa 7% +13 +14 Latin
America (e.g. Mexico, Peru) 6% +7 +8 Middle East / North Africa 6%
+2 +3 Russia 4% +44 +45 Thailand 3% +6 +8 Continental Europe (e.g.
Poland) 2% +12 +13
Developed Markets U.S. 24%
+1 +3 Asia (e.g. Japan, Korea, Taiwan) 10% (1) Even Australia 10%
+11 +10 U.K. 9% +6 +6 Continental Europe (e.g. France, Germany) 7%
+8 +8 Canada 3% Even +1 Latin America (e.g. Puerto Rico) 1%
+6 +6
1 See website www.yum.com under tab
"Investors" for a list of the countries within each of the
markets.
2 Reflects Full Year 2014.
PIZZA HUT DIVISION
Second
Quarter
Year-to-Date
% Change % Change
2015
2014
Reported
Ex
F/X
2015
2014
Reported
Ex
F/X
Restaurants 13,579 13,338 +2 NA 13,579 13,338 +2 NA System Sales
Growth (3) +1 (2) +2 Same-Store Sales Growth (%) Even (3) NM NM
Even (2) NM NM Franchise & License Fees ($MM) 119 123 (3) +2
246 250 (1) +2 Restaurant Margin (%) 9.9 7.2 2.7 2.4 10.8 9.0 1.8
1.4 Operating Profit ($MM) 60 63 (4) (1) 141 147 (4) (2) Operating
Margin (%) 22.6 23.5 (0.9) (1.0)
26.4 27.6 (1.2) (1.4)
- Pizza Hut Division system sales
increased 1%, prior to foreign currency translation.
Second Quarter (% Change)
Int'l Emerging Markets Int'l Developed
Markets U.S. System Sales Growth (Ex F/X) +6%
Even +1% Same-Store Sales Growth +2%
(2)% +1%
- Pizza Hut Division opened 66 new
international restaurants in 33 countries, including 33 units in
emerging markets. 92% of these new units were opened by
franchisees.
- Operating margin declined 0.9
percentage points, driven by strategic investments in international
G&A.
- Foreign currency translation negatively
impacted operating profit by $2 million.
PIZZA HUT MARKETS1
Percent of Pizza Hut System
Sales2
SYSTEM Sales Growth Ex F/X Second Quarter (%)
Year-to-Date (%) Emerging Markets Latin
America (e.g. Mexico, Peru) 7% +6 +7 Asia (e.g. Malaysia,
Indonesia, Philippines) 5% +3 +3 Middle East / North Africa 5% +8
+6 Continental Europe (e.g. Poland) 1% +8 +7
Developed
Markets U.S. 55% +1 Even Asia (e.g. Japan, Korea, Taiwan) 9%
(1) (1) U.K. 6% +4 +4 Continental Europe (e.g. France, Germany) 5%
+2 +3 Australia 3% (6) (5) Canada 3% +2 +4 Latin America (e.g.
Puerto Rico) 1% (1) +4
1 See website www.yum.com under tab
"Investors" for a list of the countries within each of the
markets.
2 Reflects Full Year 2014.
TACO BELL DIVISION
Second
Quarter
Year-to-Date
% Change % Change
2015
2014
Reported
Ex
F/X
2015
2014
Reported
Ex
F/X
Restaurants 6,257 6,074 +3 NA 6,257 6,074 +3 NA System Sales Growth
+9 +9 +9 +9 Same-Store Sales Growth (%) +6 +2 NM NM +6 +1 NM NM
Franchise & License Fees ($MM) 106 97 +9 +9 202 182 +11 +11
Restaurant Margin (%) 23.0 17.7 5.3 5.3 21.4 16.7 4.7 4.7 Operating
Profit ($MM) 140 109 +29 +29 255 193 +32 +32 Operating Margin (%)
29.5 24.8 4.7 4.7
28.1 23.2 4.9 4.9
- Taco Bell Division system sales
increased 9%, driven by 6% same-store sales growth and 3% unit
growth.
- Taco Bell Division opened 58 new
restaurants; 88% of these new units were opened by
franchisees.
- Restaurant margin was 23.0%, an
increase of 5.3 percentage points, driven by same-store sales
growth.
- Operating margin increased 4.7
percentage points, driven by same-store sales growth.
INDIA DIVISION
- India Division system sales were
even prior to foreign currency translation, as 16% unit growth was
offset by an 11% same-store sales decline.
- Operating loss was $3 million, as
compared to an operating loss of $1 million in prior year.
India Units
Q2 2015 % Change2
Restaurants1 825 +16% KFC 385 +13%
Pizza Hut Casual Dining 179 (2)% Home Service 255
+37%
1 Total includes 6 Taco Bell units.
2 Represents year-over-year change.
SPECIAL ITEMS / SHARE REPURCHASE
UPDATE
- In 2010, we refranchised our Mexico
equity market but did not sell the underlying real estate. During
the quarter, we initiated plans to sell this real estate, and as a
result, we wrote down the carrying value of our Mexico business to
its fair value, triggering a $68 million non-cash Special Items
charge to Refranchising Loss. This charge negatively impacted
reported EPS by $0.13 for the quarter, while benefiting our
ex-Special tax rate by 2 percentage points.
- Year-to-date through July 13, 2015, we
repurchased 4.4 million shares totaling $363 million at an average
price of $82.
CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the
company's financial performance and strategies at 9:15 a.m. Eastern
Time Wednesday, July 15, 2015. The number is 877/815-2029 for U.S.
callers and 706/645-9271 for international callers.
The call will be available for playback beginning at 1:00 p.m.
Eastern Time Wednesday, July 15, through midnight Saturday, August
15, 2015. To access the playback, dial 855/859-2056 in the United
States and 404/537-3406 internationally. The playback pass code is
50758903.
The webcast and the playback can be accessed via the internet by
visiting Yum! Brands' website, www.yum.com/investors and selecting
“Q2 2015 Earnings Conference Call” under “Events &
Presentations.” A podcast will be available within 24 hours.
ADDITIONAL INFORMATION
ONLINE
Quarter end dates for each division, restaurant-count details
and definitions of terms are available online at www.yum.com under
“Investors.”
This announcement, any related announcements and the related
webcast may contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend all forward-looking
statements to be covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by the fact that they do not relate
strictly to historical or current facts. Our forward-looking
statements are subject to risks and uncertainties, which may cause
actual results to differ materially from those projected. Factors
that can cause our actual results to differ materially include, but
are not limited to: food safety and food borne-illness issues;
changes in economic conditions, consumer preferences, tax rates and
laws and the regulatory environment, as well as increased
competition and other risks in China, where a significant and
growing portion of our restaurants are located; the impact or
threat of any widespread illness or outbreaks of viruses or other
diseases; changes in economic and political conditions in the other
countries outside the U.S. where we operate; our ability to protect
the integrity and security of individually identifiable data of our
customers and employees; our ability to secure and maintain
distribution and adequate supply to our restaurants; the success of
our international development strategy; commodity, labor and other
operating costs; the continued viability and success of our
franchise and license operators; consumer preferences and
perceptions of our brands; the impact of social media; pending or
future litigation and legal claims or proceedings; changes in or
noncompliance with government regulations; tax matters, including
disagreements with taxing authorities; significant changes in
global economic conditions, including consumer spending, consumer
confidence and unemployment; and competition within the retail food
industry, including with respect to price and quality of food
products, new product development, advertising levels and
promotional initiatives, customer service, reputation, restaurant
location, and attractiveness and maintenance of properties. You
should consult our filings with the Securities and Exchange
Commission (including the information set forth under the captions
“Risk Factors” and “Forward-Looking Statements” in our Annual
Report on Form 10-K) for additional detail about factors that could
affect our financial and other results. Forward-looking statements
are based on current expectations and assumptions and currently
available data and are neither predictions nor guarantees of future
events or performance. You should not place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We are not undertaking to update any of these statements.
Yum! Brands, Inc., based in Louisville, Kentucky, has over
41,000 restaurants in more than 125 countries and territories. Yum!
is ranked #228 on the Fortune 500 List with revenues of over $13
billion in 2014 and is one of the Aon Hewitt Top Companies for
Leaders in North America. The Company's restaurant brands - KFC,
Pizza Hut and Taco Bell - are the global leaders of the chicken,
pizza and Mexican-style food categories. Outside the United States,
the Yum! Brands system opens over five new restaurants per day on
average, making it a leader in international retail
development.
YUM! Brands, Inc.
Condensed Consolidated Summary of
Results
(amounts in millions, except per share
amounts)
(unaudited)
Quarter ended % Change Year to date % Change 6/13/15
6/14/14 B/(W) 6/13/15 6/14/14 B/(W) Company sales $
2,659 $ 2,758 (4) $ 4,838 $ 5,050 (4) Franchise and license fees
and income 446 446 — 889 878 1 Total
revenues 3,105 3,204 (3) 5,727 5,928
(3) Company restaurant expenses Food and paper 841 886 5
1,529 1,611 5 Payroll and employee benefits 602 620 3 1,095 1,113 2
Occupancy and other operating expenses 805 824 2
1,421 1,457 3 Company restaurant expenses 2,248 2,330
4 4,045 4,181 3 General and administrative expenses 353 352
(1) 648 623 (4) Franchise and license expenses 47 34 (36) 81 67
(22) Closures and impairment (income) expenses 24 21 (8) 27 24 (10)
Refranchising (gain) loss 68 (4 ) NM 58 (7 ) NM Other (income)
expense (6 ) (8 ) (30) (9 ) (10 ) (12) Total costs and expenses,
net 2,734 2,725 — 4,850 4,878 1
Operating Profit 371 479 (22) 877 1,050 (16) Interest expense, net
33 29 (15) 67 62 (9) Income before
income taxes 338 450 (25) 810 988 (18) Income tax provision 102
112 8 213 251 15 Net income - including
noncontrolling interests 236 338 (30) 597 737 (19) Net income
(loss) - noncontrolling interests 1 4 86 — 4
96 Net income - YUM! Brands, Inc. $ 235 $ 334
(30) $ 597 $ 733 (19)
Effective tax
rate
30.4 % 24.9 % (5.5 ppts.) 26.3 % 25.4 % (0.9 ppts.)
Basic EPS
Data
EPS $ 0.54 $ 0.75 (28) $ 1.36 $ 1.64
(17) Average shares outstanding 437 446 2 437
446 2
Diluted EPS
Data
EPS $ 0.53 $ 0.73 (28) $ 1.34 $ 1.61
(17) Average shares outstanding 445 455 2 446
456 2 Dividends declared per common share $ 0.82
$ 0.37 $ 0.82 $ 0.74
See accompanying notes.
Percentages may not recompute due to
rounding.
YUM! Brands, Inc.
CHINA DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year to date % Change 6/13/15
6/14/14 B/(W) 6/13/15 6/14/14 B/(W) Company sales $
1,608 $ 1,683 (4) $ 2,843 $ 3,039 (6) Franchise and license fees
and income 28 26 2 49 49 (1) Total
revenues 1,636 1,709 (4) 2,892 3,088
(6) Company restaurant expenses Food and paper 515 531 3 907
949 4 Payroll and employee benefits 333 337 1 577 578 — Occupancy
and other operating expenses 526 532 1 892 912
2 Company restaurant expenses 1,374 1,400 2 2,376 2,439 3
General and administrative expenses 100 102 2 168 164 (2) Franchise
and license expenses 5 3 (38) 9 6 (44) Closures and impairment
(income) expenses 17 17 3 19 19 2 Other (income) expense (4 ) (7 )
(34) (14 ) (19 ) (25) 1,492 1,515 2 2,558
2,609 2 Operating Profit $ 144 $ 194 (26) $
334 $ 479 (30) Company sales 100.0 % 100.0 %
100.0 % 100.0 % Food and paper 32.0 31.5 (0.5 ppts.) 31.9 31.2 (0.7
ppts.) Payroll and employee benefits 20.7 20.0 (0.7 ppts.) 20.3
19.0 (1.3 ppts.) Occupancy and other operating expenses 32.7
31.7 (1.0 ppts.) 31.4 30.0 (1.4 ppts.)
Restaurant margin 14.6 % 16.8 % (2.2 ppts.) 16.4 % 19.8 % (3.4
ppts.) Operating margin 8.8 % 11.4 % (2.6 ppts.) 11.6 % 15.5
% (3.9 ppts.)
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
KFC DIVISION Operating Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year to date % Change 6/13/15
6/14/14 B/(W) 6/13/15 6/14/14 B/(W) Company sales $
505 $ 558 (9) $ 950 $ 1,027 (7) Franchise and license fees and
income 189 196 (3) 386 391 (1) Total
revenues 694 754 (8) 1,336 1,418 (6)
Company restaurant expenses Food and paper 171 194 12 324
358 10 Payroll and employee benefits 118 135 13 222 249 11
Occupancy and other operating expenses 138 157 11 258
287 10 Company restaurant expenses 427 486 12 804 894
10 General and administrative expenses 93 94 — 172 170 (1)
Franchise and license expenses 21 17 (23) 38 34 (11) Closures and
impairment (income) expenses 2 1 (6) 2 1 (128) Other (income)
expense (1 ) 1 NM (1 ) 1 NM 542 599 9
1,015 1,100 8 Operating Profit $ 152 $ 155
(2) $ 321 $ 318 1 Company sales 100.0 %
100.0 % 100.0 % 100.0 % Food and paper 34.0 34.9 0.9 ppts. 34.1
34.9 0.8 ppts. Payroll and employee benefits 23.3 24.2 0.9 ppts.
23.4 24.3 0.9 ppts. Occupancy and other operating expenses 27.4
28.0 0.6 ppts. 27.2 27.9 0.7 ppts.
Restaurant margin 15.3 % 12.9 % 2.4 ppts. 15.3 % 12.9 % 2.4 ppts.
Operating margin 21.9 % 20.6 % 1.3 ppts. 24.0 % 22.4 % 1.6
ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
PIZZA HUT DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year to date % Change 6/13/15
6/14/14 B/(W) 6/13/15 6/14/14 B/(W) Company sales $
145 $ 142 2 $ 289 $ 282 2 Franchise and license fees and income 119
123 (3) 246 250 (1) Total revenues 264
265 — 535 532 1 Company
restaurant expenses Food and paper 40 43 8 80 85 6 Payroll and
employee benefits 45 44 (2) 89 87 (3) Occupancy and other operating
expenses 46 45 (3) 89 85 (5) Company
restaurant expenses 131 132 1 258 257 — General and administrative
expenses 61 58 (6) 118 107 (10) Franchise and license expenses 9 10
11 17 18 5 Closures and impairment (income) expenses 3 1 NM 3 2
(77) Other (income) expense — 1 NM (2 ) 1 NM
204 202 (1) 394 385 (2) Operating
Profit $ 60 $ 63 (4) $ 141 $ 147 (4)
Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper
27.5 30.5 3.0 ppts. 27.7 30.1 2.4 ppts. Payroll and employee
benefits 30.9 31.0 0.1 ppts. 30.8 30.8 — Occupancy and other
operating expenses 31.7 31.3 (0.4 ppts.) 30.7
30.1 (0.6 ppts.) Restaurant margin 9.9 % 7.2 % 2.7 ppts.
10.8 % 9.0 % 1.8 ppts. Operating margin 22.6 % 23.5 % (0.9
ppts.) 26.4 % 27.6 % (1.2 ppts.)
See accompanying notes.
Percentages may not recompute due to
rounding.
YUM! Brands, Inc.
TACO BELL DIVISION Operating
Results
(amounts in millions)
(unaudited)
Quarter ended % Change Year to date % Change 6/13/15
6/14/14 B/(W) 6/13/15 6/14/14 B/(W) Company sales $
370 $ 342 8 $ 705 $ 648 9 Franchise and license fees and income 106
97 9 202 182 11 Total revenues 476
439 9 907 830 9 Company
restaurant expenses Food and paper 103 104 1 197 196 — Payroll and
employee benefits 101 100 (2) 199 192 (4) Occupancy and other
operating expenses 81 77 (4) 159 151
(5) Company restaurant expenses 285 281 (2) 555 539 (3) General and
administrative expenses 47 43 (7) 90 88 (3) Franchise and license
expenses 4 5 32 6 9 27 Closures and impairment (income) expenses 1
1 (18) 2 1 (36) Other (income) expense (1 ) — NM (1 ) —
NM 336 330 (2) 652 637 (2)
Operating Profit $ 140 $ 109 29 $ 255 $ 193
32 Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food
and paper 27.8 30.5 2.7 ppts. 27.9 30.3 2.4 ppts. Payroll and
employee benefits 27.4 29.0 1.6 ppts. 28.2 29.6 1.4 ppts. Occupancy
and other operating expenses 21.8 22.8 1.0 ppts. 22.5
23.4 0.9 ppts. Restaurant margin 23.0 % 17.7 % 5.3
ppts. 21.4 % 16.7 % 4.7 ppts. Operating margin 29.5 % 24.8 %
4.7 ppts. 28.1 % 23.2 % 4.9 ppts.
See accompanying notes.
Percentages may not recompute due to rounding.
YUM! Brands, Inc.
Condensed Consolidated Balance
Sheets
(amounts in millions)
(unaudited) 6/13/15 12/27/14
ASSETS Current
Assets Cash and cash equivalents $ 636 $ 578 Accounts and notes
receivable, less allowance: $16 in 2015 and $12 in 2014 350 325
Inventories 279 301 Prepaid expenses and other current assets
276
254 Deferred income taxes 104 93 Advertising cooperative assets,
restricted 84 95
Total Current Assets
1,729
1,646
Property, plant and equipment, net of
accumulated depreciation and amortization of $3,704 in 2015 and
$3,584 in 2014
4,372 4,498 Goodwill 684 700 Intangible assets, net 294 318
Investments in unconsolidated affiliates 39 52 Other assets 554 560
Deferred income taxes
622
571
Total Assets $
8,294
$ 8,345
LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities Accounts payable and other
current liabilities $ 1,881 $ 1,972 Income taxes payable 156 77
Short-term borrowings 568 267 Advertising cooperative liabilities
84 95
Total Current Liabilities 2,689 2,411
Long-term debt 2,831 3,077 Other liabilities and deferred
credits 1,141 1,244
Total Liabilities 6,661
6,732 Redeemable noncontrolling interest 8
9
Shareholders' Equity Common stock, no
par value, 750 shares authorized; 432 shares and 434 shares issued
in 2015 and 2014, respectively — — Retained earnings
1,726
1,737 Accumulated other comprehensive income (loss)
(157
) (190 )
Total Shareholders' Equity - YUM! Brands, Inc.
1,569
1,547 Noncontrolling interests 56 57
Total
Shareholders' Equity
1,625
1,604
Total Liabilities, Redeemable Noncontrolling
Interest and Shareholders' Equity $
8,294
$ 8,345
See accompanying notes.
YUM! Brands, Inc.
Condensed Consolidated Statements of
Cash Flows
(amounts in millions)
(unaudited)
Year to date ended 6/13/15 6/14/14
Cash Flows -
Operating Activities Net income - including noncontrolling
interests $ 597 $ 737 Depreciation and amortization 326 320
Closures and impairment (income) expenses 27 24 Refranchising
(gain) loss 58 (7 ) Contributions to defined benefit pension plans
(78 ) (14 ) Deferred income taxes (77 ) (10 ) Equity income from
investments in unconsolidated affiliates (16 ) (22 ) Distributions
of income received from unconsolidated affiliates 4 7 Excess tax
benefit from share-based compensation (40 ) (25 ) Share-based
compensation expense 28 25 Changes in accounts and notes receivable
16 12 Changes in inventories 21 5 Changes in prepaid expenses and
other current assets (27 ) (11 ) Changes in accounts payable and
other current liabilities 11 (27 ) Changes in income taxes payable
91 96 Other, net 6 (26 )
Net Cash Provided by Operating
Activities 947 1,084
Cash Flows -
Investing Activities Capital spending (404 ) (408 ) Changes in
short-term investments, net (16 ) (227 ) Proceeds from
refranchising of restaurants 29 17 Other, net 39 4
Net Cash Used in Investing Activities (352 ) (614 )
Cash Flows - Financing Activities Repayments of long-term
debt (7 ) (5 ) Short-term borrowings by original maturity More than
three months - proceeds — — More than three months - payments — —
Three months or less, net — — Revolving credit facilities, three
months or less, net 65 178 Repurchase shares of Common Stock (287 )
(300 ) Excess tax benefit from share-based compensation 40 25
Employee stock option proceeds 11 16 Dividends paid on Common Stock
(355 ) (327 ) Other, net (43 ) (20 )
Net Cash Used in Financing
Activities (576 ) (433 )
Effect of Exchange Rate on Cash and
Cash Equivalents 39 (13 )
Net Increase in Cash and
Cash Equivalents 58 24
Cash and Cash Equivalents - Beginning
of Period 578 573
Cash and Cash Equivalents -
End of Period $ 636 $ 597
See accompanying notes.
Reconciliation of Non-GAAP Measurements
to GAAP Results
(amounts in millions, except per share
amounts)
(unaudited)
In addition to the results provided in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP") throughout this
document, the Company has provided non-GAAP measurements which
present operating results in 2015 and 2014 on a basis before
Special Items. Included in Special Items are losses associated with
the refranchising of equity markets outside the U.S., costs
associated with the KFC U.S. Acceleration Agreement and U.S.
refranchising gain. These amounts are described in (c), (d) and (e)
in the accompanying notes. The Company uses earnings before
Special Items as a key performance measure of results of operations
for the purpose of evaluating performance internally and Special
Items are not included in any of our segment results. This non-GAAP
measurement is not intended to replace the presentation of our
financial results in accordance with GAAP. Rather, the Company
believes that the presentation of earnings before Special Items
provides additional information to investors to facilitate the
comparison of past and present operations, excluding items in the
quarters ended June 13, 2015 and June 14, 2014 that the Company
does not believe are indicative of our ongoing operations due to
their size and/or nature. Quarter ended Year
to date 6/13/15 6/14/14 6/13/15 6/14/14
Detail of
Special Items Losses associated with the refranchising of
equity markets outside the U.S.(c) $ (73 ) $ — $ (73 ) $ — Costs
associated with KFC U.S. Acceleration Agreement(d) (8 ) — (10 ) —
U.S. Refranchising gain(e) 1 1 8 3 Other Special Items Income
(Expense) 2 — 2 — Total Special Items
Income (Expense) (78 ) 1 (73 ) 3 Tax Benefit (Expense) on Special
Items 3 — 1 (1 ) Special Items Income
(Expense), net of tax $ (75 ) $ 1 $ (72 ) $ 2 Average
diluted shares outstanding 445 455 446 456
Special Items diluted EPS $ (0.16 ) $ — $ (0.16 ) $
0.01
Reconciliation of Operating Profit Before
Special Items to Reported Operating Profit Operating Profit
Before Special Items $ 449 $ 478 $ 950 $ 1,047 Special Items Income
(Expense) (78 ) 1 (73 ) 3 Reported Operating Profit $
371 $ 479 $ 877 $ 1,050
Reconciliation of EPS Before Special Items to Reported EPS
Diluted EPS Before Special Items $ 0.69 $ 0.73 $ 1.50 $ 1.60
Special Items EPS (0.16 ) — (0.16 ) 0.01 Reported EPS
$ 0.53 $ 0.73 $ 1.34 $ 1.61
Reconciliation of Effective Tax Rate Before Special Items to
Reported Effective Tax Rate Effective Tax Rate Before Special
Items 25.6 % 24.9 % 24.4 % 25.4 % Impact on Tax Rate as a result of
Special Items 4.8 % — % 1.9 % — % Reported Effective Tax Rate 30.4
% 24.9 % 26.3 % 25.4 %
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Quarter Ended 6/13/15 China KFC
Pizza Hut
Taco Bell India
CorporateandUnallocated
Consolidated Total revenues $ 1,636 $ 694 $ 264
$ 476 $ 35 $ — $ 3,105
Company restaurant expenses 1,374 427 131 285 31 — 2,248 General
and administrative expenses 100 93 61 47 6 46 353 Franchise and
license expenses 5 21 9 4 — 8 47 Closures and impairment (income)
expenses 17 2 3 1 1 — 24 Refranchising (gain) loss — — — — — 68 68
Other (income) expense (4 ) (1 ) — (1 ) — — (6
) 1,492 542 204 336 38 122
2,734 Operating Profit (loss) $ 144 $ 152
$ 60 $ 140 $ (3 ) $ (122 ) $ 371
Quarter Ended 6/14/14 China KFC Pizza
Hut Taco Bell India
CorporateandUnallocated
Consolidated Total revenues $ 1,709 $ 754 $
265 $ 439 $ 37 $ — $ 3,204
Company restaurant expenses 1,400 486 132 281 31 — 2,330
General and administrative expenses 102 94 58 43 7 48 352 Franchise
and license expenses 3 17 10 5 (1 ) — 34 Closures and impairment
(income) expenses 17 1 1 1 1 — 21 Refranchising (gain) loss — — — —
— (4 ) (4 ) Other (income) expense (7 ) 1 1 —
— (3 ) (8 ) 1,515 599 202 330 38
41 2,725 Operating Profit (loss) $ 194
$ 155 $ 63 $ 109 $ (1 ) $ (41 ) $ 479
The above tables reconcile segment information, which is based
on management responsibility, with our Condensed Consolidated
Summary of Results. Corporate and unallocated expenses comprise
items that are not allocated to segments for performance reporting
purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Year to Date 6/13/15 China KFC Pizza Hut Taco Bell
India
CorporateandUnallocated
Consolidated Total revenues $ 2,892 $ 1,336 $ 535
$ 907 $ 57 $ — $ 5,727
Company restaurant expenses 2,376 804 258 555 52 — 4,045 General
and administrative expenses 168 172 118 90 10 90 648 Franchise and
license expenses 9 38 17 6 1 10 81 Closures and impairment (income)
expenses 19 2 3 2 1 — 27 Refranchising (gain) loss — — — — — 58 58
Other (income) expense (14 ) (1 ) (2 ) (1 ) — 9 (9 )
2,558 1,015 394 652 64 167
4,850 Operating Profit (loss) $ 334 $ 321
$ 141 $ 255 $ (7 ) $ (167 ) $ 877
Year to Date 6/14/14 China KFC Pizza
Hut
Taco Bell
India
CorporateandUnallocated
Consolidated Total revenues $ 3,088 $ 1,418 $
532 $ 830 $ 60 $ — $ 5,928
Company restaurant expenses 2,439 894 257 539 52 — 4,181
General and administrative expenses 164 170 107 88 11 83 623
Franchise and license expenses 6 34 18 9 — — 67 Closures and
impairment (income) expenses 19 1 2 1 1 — 24 Refranchising (gain)
loss — — — — — (7 ) (7 ) Other (income) expense (19 ) 1 1
— — 7 (10 ) 2,609 1,100
385 637 64 83 4,878 Operating
Profit (loss) $ 479 $ 318 $ 147 $ 193 $
(4 ) $ (83 ) $ 1,050
The above tables reconcile segment information, which is based
on management responsibility, with our Condensed Consolidated
Summary of Results. Corporate and unallocated expenses comprise
items that are not allocated to segments for performance reporting
purposes.
The Corporate and Unallocated column in the above tables
includes, among other amounts, all amounts that we have deemed
Special Items. See Reconciliation of Non-GAAP Measurements to GAAP
Results.
Notes to the Condensed Consolidated
Summary of Results, Condensed Consolidated Balance Sheets
and Condensed Consolidated Statements
of Cash Flows
(amounts in millions)
(unaudited)
(a) Amounts presented as of and for the quarter and
year to date ended June 13, 2015 are preliminary. (b) Other
(income) expense for the China Division primarily consists of
equity (income) loss from investments in unconsolidated affiliates.
(c) In 2010 we refranchised our then
remaining Company-operated restaurants in Mexico. To the extent we
owned it, we did not sell the real estate related to certain of
these restaurants, instead leasing it to the franchisee. During the
quarter ended June 13, 2015 we initiated plans to sell this real
estate and determined it was held for sale in accordance with GAAP.
The sales price we expect to receive for this real estate exceeds
its book value. However, the sale of the real estate will represent
a substantial liquidation of our Mexican operations under U.S.
GAAP. Accordingly, we are required to include accumulated
translation losses associated with our Mexican business within our
held for sale impairment evaluations. As such, we recorded a $68
million non-cash Special Items charge to Refranchising Loss,
consistent with the classification of the original market
refranchising transaction, representing the excess of the sum of
the book value of the real estate and our accumulated translation
losses over the expected sales price for the real estate. Our
current expectation is that the real estate sale will close late in
2015 with limited, if any, additional pre-tax gain or loss. The
refranchising is ultimately expected to result in a taxable gain as
the anticipated proceeds will exceed the tax basis in the real
estate, though the related tax expense will not be recognized until
the sale closes.
Additionally, during the quarter ended June 13, 2015 we recognized
a Special Items charge of $5 million associated with the decision
to offer to refranchise our Pizza Hut Korea restaurants. None of
these restaurants have yet to meet the criteria to be classified as
held for sale and additional charges may occur as the refranchising
plans move forward. Such charges are not expected to be material at
this time.
(d) During the first quarter of 2015, we
reached an agreement with our KFC U.S. franchisees that will give
us brand marketing control as well as an accelerated path to
improved assets and customer experience. In connection with this
agreement we recognized a Special Items charge of $8 million for
the quarter ended June 13, 2015, primarily related to the funding
of investments for new back-of-house equipment for franchisees. We
continue to expect a total charge of approximately $90 million in
2015 for these and other investments we agreed to fund.
(e) During both the quarters ended June
13, 2015 and June 14, 2014, we recorded Special Items gains of $1
million related to refranchising in the U.S. During the years to
date ended June 13, 2015 and June 14, 2014, we recorded Special
Items gains of $8 million and $3 million, respectively, related to
refranchising in the U.S.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150714006606/en/
Yum! Brands, Inc.Analysts:Steve Schmitt, 888-298-6986Vice
President Investor Relations & Corporate StrategyorElizabeth
Grenfell, 888-298-6986Director Investor RelationsorMedia:Virginia
Ferguson, 502-874-8200Director Public Relations
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